OREADLABSSHARPENSITSFOCUSONRESEARCH

Within the next several weeks, officials at Oread Laboratories Inc. expect to have the paperwork in place for a limited partnership to develop a new drug.

Bill Duncan, Oread Labs' president and chief executive officer, said the caffeine citrate product would be designed to prevent apnea, or the temporary cessation of breathing, in premature infants.

Duncan said an Oread Labs subsidiary would act as general partner with at least one major pharmaceutical firm participating in the venture.

Six-month clinical trials on the product are expected to start after the first of the year, Duncan said.

He explained that the firm or firms that join Oread in the venture would take the product to the marketplace, but all the revenues from sales would be returned to the partnership. Oread, which is investing in research and development for the project, both in terms of expertise and capital, stands to profit through its stake in the partnership.

ALTHOUGH Oread is heading up a limited partnership to develop the caffeine citrate research, the company has shifted its focus to being almost exclusively a provider of contractual research services to the pharmaceutical and biotechnology industries.

Toward that end, Oread has divested most of its product-development activities, which previously had been a long-term revenue stream the 9-year-old company had pursued. Duncan explained that, by comparison, research contracts generate revenue in the near term.

"A strategic decision was made in January that we probably couldn't have our cake and eat it too," Duncan said of dual mission the company previously pursued. "If we're going to grow, the company will have to reinvest profits in equipment and facilities."

THAT MEANS Oread Labs will be leaving the commercialization of its research to others.

Another example of this strategy, Duncan said, is a contract the firm struck this year with a Japanese firm to produce a form of taxol, the cancer-fighting substance found in yew trees, in the lab.

Oread Labs had supported the taxol research of Lester Mitscher, Kansas University distinguished professor of medicinal chemistry, who developed a method of extracting taxol from yew leaves rather from the bark, which required the destruction of trees.

Now, Oread Labs' involvement in the project is almost strictly on the research end, while the Japanese firm, which is remaining anonymous, is funding the project in exchange for first rights to license any cancer- fighting compound that's developed.

"Rather than getting into that from a product point of view, we negotiated the research contract with the Japanese firm to develop what would be the `son of taxol,' " a compound that could be produced in the lab, Duncan said.

"We basically parlayed the work we did on taxol into this fairly substantial three-year contract."

FOR ITS PART, Duncan said, Oread Labs would receive a licensing fee and royalties on the sale of any commercialized compound.

The contract itself is a testimonial to Oread Labs' stature in the pharmaceutical research community and the value of the taxol research it sponsored.

"The reason were able to retain the rights to the technologies is because of what we're bringing to the table on the intellectual property front," Duncan said.

The company, which held its annual meeting Sunday, reported revenues of $6.45 million for the fiscal year that ended June 30, up from $4.9 million the year before. Oread Labs has been profitable for two years now, Duncan said.

It employs 98 people, up from 71 last year, and is expanding its facilities at 1501 Wakarusa Dr. A 12,000-square-foot administration center, the company's third building, is scheduled for completion in spring.